Sun Microsystems Reverse Split
Sun Microsystems recently changed it’s ticker from SUNW to JAVA. It appears that with the new ticker they’re trying to re-invent their stock price through a reverse split. The details for the split are found here.
According to the SEC filing the reverse split will increase EPS, reduce shareholder transaction costs, and increase share price. I agree that all of these will be true, but through a little smoke and mirrors instead of the normal technique of growing the business.
It should be noted that I don’t have an axe to grind with Sun. I like their software Solaris and Java. I think they make world class hardware, and I think they have some of the most intelligent people in the IT industry working for them. What I do have a problem with is pulling tricks with the stock to create an illusion that the company is worth more than it really is.
As of the price today once the reverse split is completed JAVA’s new price will stand around $21/share. I get the sense that with the ticker change and the higher price due to the split they’re trying to lure new investors into the company and pump the price up.
Note to Sun: If you want your share price to rise legitimately have your sales force return calls from clients. License Solaris technologies to other companies. Introduce a rock bottom server to get new clients in the door. No more reverse splits will be needed.
Disclaimer: I do not own a position in JAVA, although I do own a Sun server, and have used the Solaris operating system, and the Java programming language.